Dynamo Holdings Ltd. P’ship v. Comm’r of Internal Revenue, Nos. 2685-11, 8393-12 (T.C. Sept. 17, 2014)

In this case, the court approved petitioners’ (Dynamo Holdings Ltd. Partnership et. al.) use of predictive coding to identify potentially responsive and privileged data contained on two backup tapes, despite respondent’s (Commissioner of Internal Revenue) objection that the technology was “unproven.”

In response to respondent’s motion to compel the production of information contained on two backup tapes, petitioners sought to have the motion denied as a “fishing expedition” or, alternatively, the court’s permission to utilize predictive coding “to efficiently and economically identify the nonprivileged information responsive to respondent’s discovery request.” Respondent opposed the use of predictive coding, calling it “unproven technology” and argued that petitioners “need not devote their claimed time or expense to this matter because they c[ould] simply give him access to all data on the two tapes and preserve the right (through a ‘clawback agreement’) to later claim that some or all of the data is privileged information not subject to discovery.”

In the course of its analysis, the court noted the “somewhat unusual” nature of petitioners’ request:

In this respect, we note that this request is somewhat unusual. Our Rules are clear that “the Court expects the parties to attempt to attain the objectives of discovery through informal consultation or communication” before resorting to formal discovery procedures. Rule 70(a)(1). And although it is a proper role of the Court to supervise the discovery process and intervene when it is abused by the parties, the Court is not normally in the business of dictating to parties the process that they should use when responding to discovery. If our focus were on paper discovery, we would not (for example) be dictating to a party the manner in which it should review documents for responsiveness or privilege, such as whether that review should be done by a paralegal, a junior attorney, or a senior attorney. Yet that is, in essence, what the parties are asking the Court to consider — whether document review should be done by humans or with the assistance of computers. Respondent fears an incomplete response to his discovery. If respondent believes that the ultimate discovery response is incomplete and can support that belief, he can file another motion to compel at that time. Nonetheless, because we have not previously addressed the issue of computer-assisted review tools, we will address it here.

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